Peru - Poverty Structural Adjustment Loan Project

Report No. PID8181 Project Name Peru-Poverty Structural Adjustment Loan Region Latin America and Caribbean Project ID PEPE64080 Borrower Government of Peru Implementing Agency Ministry of Economy and Finance Jr. Junin 319, Lima, Peru Tel: 51-1-426-8495 Fax: 51-1-426-7836 Date PID Prepared September 17, 1999 Appraisal Date September 15, 1999 Board Date December 16, 1999 Background In the past decade, Peru has made remarkable progress on both economic and political fronts. On the economic side, rampaging inflation has been curtailed, debt arrears have been cleared, and a major program of privatization and public sector strengthening has been undertaken. Politically, law and order has been restored and the major guerilla movements have been curtailed, resulting in the reintegration of the rural economy with the rest of Peru. As a result, growth in recent years has averaged 3.5%- per year (1994-97), and reserves have climbed to over $8 billion. Despite these gains, poverty remains pervasive. Recent estimates suggest that 49%- of the population remains below the poverty line, and in rural areas the rate is over 60%-. While this is a marked improvement from a decade ago, it also indicates that there are major challenges facing the government. Objective The main objective of the Peru Poverty SAL will be to strengthen and extend a range of programs that provide direct assistance to the poor. This includes improving the impact and administrative efficiency of existing programs, eliminating unnecessary or inefficient programs, and putting in place new programs, particularly in the areas of health and education. The loan will also support the Government's social safety net designed to protect the poor during an economic crisis.. Description The Poverty SAL supports reforms in five broad areas: - Poverty Strategy. The loan will support reforms aimed at improving the targeting of anti-poverty programs, improvements in the monitoring and evaluation, the identification of key programs to be protected from budget cuts, and a contingency plan for employment focused activities to be activated in the event of a crisis. - Nutrition. The SAL will support improvements in the existing system of overlapping nutrition programs, including improvements in targeting of  beneficiaries, improvements in administrative controls, and the elimination of duplication and waste. - Education. SAL supported reforms will help improve the quality of teaching in rural areas and those areas having low achievement results, and improve the operating efficiency of the Ministry of Education. - Health. The SAL supports reforms which will introduce a new Maternal and Child Insurance system (MCI), and the extension of the system of community based primary clinics (CLAS), as well as streamlining certain duplicative programs within the Ministry of Health - Rural Development. The loan will help improve the quality of local community planning, as well as the performance of rural water systems and rural road maintenance. Financing The Poverty SAL will be a two tranche, fast disbursing operation in the amount of $200 million, under regular terms. Precise terms will be agreed during negotiations. Implementation Peru has a strong track record in the implementation of its undertakings with the Bank. Implementation of the ongoing portfolio of one adjustment operation and ten investment projects has been satisfactory, with no problem project. Commitment to implementation is also reflected in the progress made so far under recent adjustment loans. The SAL contains strong prior actions in all key areas, in the form of conditions for Board presentation and second tranche release. Delays in preparing some of key conditions may lead to postponement of this operation until after the presidential election in April 2000 or dropping it from the lending program. Contact Points: The Infoshop The World Bank 1818 H Street, N.W. Washington D.C. 20433 Telephone No. (202) 458 5454 Fax No. (202) 522 1500 Norman Hicks Task Manager (202) 473-1977 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending September 24, 1999. - 2 -